Marshall v. Green Giant Co.
| Citation | 942 F.2d 539 |
| Decision Date | 08 October 1991 |
| Docket Number | 90-5529,Nos. 90-5528,s. 90-5528 |
| Parties | Frank MARSHALL, Louis Hedlund, Richard Thorp, Kenneth Berggren, Fred Behnke, and Oliver Bergstrom on behalf of themselves and all others similarly situated, Appellees, v. GREEN GIANT COMPANY, Appellant. Frank MARSHALL, Louis Hedlund, Richard Thorp, Kenneth Berggren, Fred Behnke, and Oliver Bergstrom on behalf of themselves and all others similarly situated, Appellants, v. GREEN GIANT COMPANY, Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
James B. Lynch, Minneapolis, Minn., for appellant.
Richard S. Florsheim, Milwaukee, Wis., argued (David F. Fisher, Minneapolis, Minn., and John R. Dawson, Milwaukee, Wis., on brief), for appellees.
Before JOHN R. GIBSON, Circuit Judge, and FLOYD R. GIBSON and ROSS, Senior Circuit Judges.
Several Minnesota farmers under contract to provide vegetables to Green Giant Company ("Green Giant") appeal the district court's dismissal of six counts of their lawsuit against Green Giant. Green Giant cross-appeals the district court's confirmation of an arbitrator's award. We affirm in all respects save one; we vacate the dismissal of one of the farmers' counts and remand for further proceedings.
Green Giant purchases large quantities of raw vegetables from farmers, processes them, and then markets them. Prior to 1974, Green Giant entered into only fixed-price contracts with growers. These contracts were typically entered early in the calendar year, while the harvest typically occurred later in the year. Consequently, the growers bore the risk that the price of vegetables would increase between the time the contracts were entered and the time the vegetables were harvested and Green Giant bore the risk that the price of vegetables would drop during that same period.
Sometime in 1974, Green Giant began to offer sweet corn growers the option of entering variable-price contracts. There was no organized futures market for sweet corn, but such markets did exist for field corn; thus, Green Giant developed a ratio equating the value of sweet corn produced to the value of field corn produced. 1 Initially, through the use of this ratio, the variable-price contracts tied the price of sweet corn to the price of field corn as reported by the Minnesota Crop and Livestock Reporting Board. However, because the price of corn increased, Green Giant was forced to pay those growers who opted for variable-price contracts more than Green Giant had expected to pay. Consequently, Green Giant developed a means whereby it could continue to offer growers variable-price contracts, yet at the same time protect itself from large increases in the price of corn.
Under this program, growers entered into contracts with Green Giant and, at that time, chose to be paid either a fixed compensation or to be paid pursuant to the "Green Line Futures Program" (hereinafter "the Program"). 2 Under the Program, the price to be paid the growers of sweet corn would fluctuate depending upon the price of field corn as reflected on the Chicago Board of Trade. At certain times after electing to participate in the Program, growers could elect to fix the price they were to be paid based on the price of field corn then reflected at the Chicago Board of Trade.
Green Giant engaged in "hedging" by purchasing and selling field corn futures on the Chicago Board of Trade in order to protect itself from the risk of increased liability to the growers enrolled in the Program caused by increases in the price of field corn. Green Giant's purchases of futures were computed based on the amount of sweet corn Green Giant expected to purchase from Growers who had opted to participate in the Program. Green Giant did not invest in futures for the purpose of making a profit; rather, Green Giant hoped to purchase and sell a sufficient amount of corn futures to offset any losses incurred in paying the growers enrolled in the Program.
The plaintiffs (hereinafter "the growers") all opted to participate in the Program in 1981. Their contracts provided that they were to be paid in two installments: the first, known as the Schedule A payment, was to take place on October 19, 1981; the second (Schedule B) was to take place on June 1, 1982. The growers' contracts provided that "[i]f the Green Line Program is exercised the Schedule 'B' payment will be adjusted as appropriate." The contracts also contained a clause providing that all controversies or claims arising from the contracts would be arbitrated.
During 1981, the price of field corn futures dropped significantly; consequently, many growers in the Program received more money in the Schedule A payment than they were due under the entire contract, and their Schedule B payment was to be, at best, nothing. Green Giant, relying on the language in the contract allowing for adjustment of the Schedule B payment, believed that the Schedule B payments could be "adjusted" to negative numbers. Green Giant acted on this belief by billing these growers for the difference between the Schedule A payment and the total amount actually due. Some growers paid this difference, while others did not.
The named plaintiffs filed suit against Green Giant in federal district court in May 1983, alleging seven theories of liability. Counts I through IV alleged that Green Giant failed to register under various provisions of the Commodity Exchange Act (CEA). 3 Count V alleged that Green Giant failed to provide a risk disclosure statement as required by 17 C.F.R. §§ 1.55, 4.21(a)(17), 4.31(a)(7) (1981). Count VI alleged violations of Minnesota's security laws, and Count VII alleged breach of contract. In June 1984, the district court 4 dismissed Counts I through IV because there was no private right of action under the CEA, and dismissed Count VI because the CEA preempted state security law claims. Green Giant also moved for a stay pending arbitration, but the district court concluded that issues of fact needed to be resolved in an evidentiary hearing in order to determine whether a stay was appropriate.
At the evidentiary hearing before the district court, 5 the growers opposed the motion for a stay, emphasizing that the key issue was whether Green Giant was a futures commission merchant (hereinafter "FCM") or an associated person under the CEA; if Green Giant was an FCM or associated person, then the arbitration clause would have been unenforceable because the arbitration clause did not comply with the requirements of 17 C.F.R. § 180.3(b) (1981). In late November 1985, the district court conducted a four-day evidentiary hearing during which the growers put on several witnesses, including expert witnesses, in an attempt to prove that Green Giant was an FCM 6 and that the arbitration provision was consequently unenforceable. On January 6, 1986, the district court concluded that Green Giant was not an FCM and ordered that the proceedings be stayed pending arbitration of the breach of contract claims.
In February 1986, the growers requested that the district court enter final judgment. The growers reasoned that Counts I through IV and VI had already been dismissed, and the court's January 6 order effectively dismissed Count V because of its holding that Green Giant was not an FCM; liability under Count V could not exist unless Green Giant was an FCM. On March 25, 1986, the court denied the growers' motion without explanation.
At some time during these proceedings, the parties entered into a stipulation. 7 Though the parties expressly disagreed as to whether 17 C.F.R. § 180.3 applied to the growers' contracts, they did agree that if Green Giant was required to comply with that regulation the arbitration agreements were void and unenforceable. The record does not reflect, and the parties do not explain, the purpose or extent to which this stipulation was utilized by them or the district court in the hearing on the motion to stay.
The parties proceeded to arbitration of the contract claims of one of the named plaintiffs (Louis Hedlund). Hedlund argued that the language in the contract did not permit Green Giant to bill him. The arbitrator agreed with Hedlund and ruled in his favor.
The parties then returned to district court. The growers sought confirmation of the arbitrator's award and partial summary judgment in favor of the remaining plaintiffs. Green Giant did not oppose confirmation of the award, but argued that the collateral estoppel effect of that award was a matter for the arbitrator, not the court, to decide. The district court agreed with Green Giant and, in January 1988, confirmed the award and referred the collateral estoppel question to arbitration. At the same time, the district court noted that the only claims remaining in the suit were state-based claims, and that there was no diversity of citizenship. In reaching this conclusion, the court did not explain the fate of the federal claims contained in Count V. Nonetheless, the court elected to retain jurisdiction (on a theory of pendent jurisdiction) because "[m]otions of some considerable substance" had already been decided in federal court, and the case had been pending for almost five years.
The parties returned to arbitration; the five remaining named plaintiffs moved to have their arbitrations consolidated, which motion was granted by the arbitrator. The arbitrator then determined that the result of the Hedlund arbitration collaterally estopped Green Giant from claiming it could collect negative Schedule B payments from the other growers. The parties then returned to district court; the growers sought confirmation of the second arbitration award, class certification, and judgment in favor of the class based on the arbitrator's decision on collateral estoppel. Green Giant opposed these motions. In ...
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